The word "start-up" conjures up visions of people always ready to leap into the unknown, with no plans for failure. But what many don't realize is that founder burnout and failure are all too common during the start phase of a startup's life cycle. When you have the thought, “I'll create the next eBay,” it's easy to get too excited and throw caution to the wind. But with all of this excitement, start-ups often forget some of the most important aspects of growing a business.
Just because you have something new to offer, doesn't mean that you'll succeed. Many things have to go right for a start-up to survive and continue to scale. The scale-up phase of entrepreneurial ventures is a huge challenge. There are a large number of reasons why this is so, but here are just some of the important ones.
Some founders lack the ability to select the right investors. Most entrepreneurs have no idea who they should talk to or what they should say in order to get a deal going. The most important thing is that you need a team that will support you and work towards your vision. You don't want to be alone with this task, so find people who are willing to do it for you. You can also try looking for investors in your network, but it may take longer and require more effort than just approaching someone who lives in another city. Start-ups are hard and money is tight, so if an investor is willing to step in, it's better than nothing at all!
One of the most common reasons for startups to fail is their complicated business models. A simple business model is one that doesn't require you to do much more than provide a product or service and then charge for it. You don't need to build a website, hire employees, etc. In fact, those are luxuries that many startups can't afford because they're still building their companies. But eventually, if you stick with it long enough, you'll get there! The most successful companies have simple business models that are easy to understand, and they have a clear purpose. If a startup's business model is too complex, it can be confusing for investors and customers alike.
In most startups, there's one thing that's more important than anything else and that is keeping employees. And if you're not able to do that, your startup is probably going to fail. It's true that some startups are able to keep their employees around long enough for them to build something amazing, but they're the exception—they happen so rarely! The majority of startups fail because they can't retain key employees. So the key to success is to have loyal, efficient and happy employees.
You know what else is common? Firing people! It's not just about not being able to retain them; sometimes it's just a matter of having to let go of someone who wasn't working out anymore. But if you don't have any other option than firing people, then firing them is going to be inevitable.
Other reasons for failure is when founders don't have a clear vision for their business. They may be too busy worrying about getting their product out there and making it work, or they may not have the skills to get it done. Either way, it's important for founders to spend time defining what they want their company to be before they start building it.
Founders may be unable to scale fast enough to meet customer demand or keep up with competitors. That's because entrepreneurs, especially those who have not scaled up a business before, don't know what they don't know. Scaling up a business is hard to do, and doing so requires changes that aren't easy for entrepreneurs to make.
Negative profitability is one reason that keeps coming up time and time again. While some people will be surprised by this statement, positive or negative profits only happen when your business makes sales. It happens when your production costs are more than your total revenue for a specific period. Startups should find ways to cut down the costs to see profit.
Takeaway: If you want your start-up to scale, you'll want to do things like keeping it simple and having a clear vision of where you want it to go!
